The lentiviruses, equine infectious anemia virus (EIAV) and the human immunodeficiency virus (HIV), encode transcriptional trans-activating proteins (Tat) that bind to a specific hairpin structure at the 5' end of nascent RNA (TAR) which positions them for interactions with the transcription apparatus. Thus, Tat proteins are predicted to contain an RNA-binding domain and an "activation" (or protein interaction) domain. The EIAV and HIV-1 Tat proteins (E-Tat and H-Tat, respectively) contain two conserved peptide motifs but are otherwise quite dissimilar and do not interact with the heterologous TAR element. We have addressed the problems of structure, function and mechanism of Tat proteins by exchanging domains between E-Tat and H-Tat and by tethering Tat sequences to an RNA operator via a bacteriophage RNA-binding protein. These strategies allowed us to define both the TAR-interaction and activation domains of each Tat protein. Both E-Tat and H-Tat appear to be simple, modular proteins in which the N- terminal half contains the activation domain and the C-terminal half is responsible for TAR binding. The activation domains of both proteins contain a highly conserved core sequence; the E-Tat activation domain consists of only 15 amino acids, whereas the H-Tat activation domain is more complex and is composed of 47 amino acids. The activation domains of the two proteins are interchangeable and competition experiments suggest that they interact with a common cellular factor. The TAR- binding domains of both proteins contain a cluster of basic amino acids; in H-Tat this sequence of about 10 residues is sufficient for RNA binding, while E-Tat requires 26 residues for TAR binding. In E-Tat, this region may be highly structured to form an RNA-binding pocket.